Re: Is the Chase Sapphire Preferred worth carrying permanently?

Open123 wrote:

For spending ranging from $12k - $15k, I think the best are no fee cash rewards cards.

To wit, all non bonus spending on 2% Fid Amex with specialty spending on Disc, Freedom, Forward, and the rest on US Bank Cash+ 5% categories. Forex spending on the BofA Travel card with chip, no forex, and no annual fee for 1.5 rewards. Avg roe should be about 3.5% - approx $450 - $500 per year.

For higher spending, the fee travel cards are more compelling. Mainly, because when spending increases, the most important aspect isn't the bonus spending, but not have caps on said spending. All issuers have caps of some kind. 5% categories are capped at $1,500; Priceline bonuss capped at 2,500; etc...Amex and Chase are two of the only issuers who have 0 caps on regular spending. For instance, let's say you pay vendors $100,000 per year. MR points/UR points more valuable, or 2% cash? When points get into the 100s of thousands, very valuable redemptions can be had which easily out paces 2%. Moreover, Amex business blue Open has 30% bonus on all points earned.

In my estimation, if one spends around $12k - $15k, cash rewards no fee cards are the best option. For those who spend north of 30K, the annual fee rewards cards are a much more compelling value. For those who spend 100k+, then only the Amex or Chase uncapped rewards would suffice.

As per the CSP, I think one who travels, dines, spends time abroad and spendings around $12k - $15k, there is no better value.

This, I just booked a plane ticket for my mom about an hour ago. the cheapest published rate online was right at 900$ it cost me 25k Membership Rewards points converted to Delta Skymiles (1:1 rate on transfer bonus right now) that made the effective cash back rate on AMEX at 3.5% on all purchases, quite a bit better than any other card out there for all purchases.

If we are talking about #1, then I'am almost 100% sure we will quickly find a combination of 3...4 or more cards (even no-AF ones) that will economically be better than CSP alone. If we also take into account cards with rotating categories, CSP will lose this battle for sure.

Although I think that this comparison is not 100% fair. It is cherrypicking and I doubt an average consumer (one who doesn't spend all nights long on myFico :-) ) will be able to properly handle all those cards to maximize his gain. CSP is more positioned (at least in my view) as a kind of "everyday use card"...

Talking about #2 I would try to compare it with BofA 1-2-3 Travel rewards (1.5% cashback on all purchases). One feature they have in common is zero foreign transaction fee, so even if travelling with those 2 cards (CSP and BofA Travel) they will be more or less equal. So, the only remaining calculation we have is to subtract BofA cashback of 1.5% on all from assumed weighted average of CSP cashbacks (if you plan to spend half on 2pts categories and half on 1pt it will then be 1.5pts on average which will lead to 1,605% with 7% bonus) and divide $95 by that number. So, in the case above it will be 95/(1.605%-1.5%) = $90 476.

Now, we can play around with spending patterns. Assuming that all spend will be in 2pts it will be 95/(2.14%-1.5%) = $14 844 - much better already!

And finally, we need to determine how your spending pattern (travel&dining vs other spend) should look like to get any gain at all (just looking for a theoretical point).

Let X be the share of your spending for travel&dining, then solving the following equation for X:

x*0.02 + (1-x)*0.01 = 0.015 / 1.07

we come up with X = 40.2%

What it means is that if the share of your spending on travel & dining on CSP is less than 40%, than it will NEVER be better than BofA 1-2-3 Travel rewards.

More you spend on travel&dining relative to other categories, less you need to spend overall to make any gain compared to BofA 1-2-3 Travel rewards.

Another interesting result is that even if you have no AF for CSP (for the 1st year) in order for it to be better than BofA 1-2-3 Travel Rewards you need to maintain at least this 40/60 split for travel&dining vs other spending. Otherwise BofA is better for you...

It seems I don't really want CSP anymore after these calculations ))))))))) Maybe only for a sign-up bonus :-))))

Edited: a couple of typos fixed

Nice math!

Couple of comments:

The BankAmericard Travel Rewards card (1-2-3 refers to the BankAmericard Cash Rewards) actually gives you 1.65 points if you have a BofA checking account.

Even at 1.65, this card is overall not as beneficial as the Fidelity. Let's say you spend 10k a year, then the difference in cash back between these cards would be 10,000x0.35%=$35. The FTF on the Fidelity is 1%; so you'd have to spend $3.5k in a foreign currency to offset the cash back disadvantage. Given that spending upward of 3.5k in a foreign currency is less likely than spending upward of 10k overall, I'd have to give the Fidelity the advantage. Since both cards do not carry an annual fee, the Fidelity would be a more worthy benchmark don't you think?

It seems that you forgot that UR points are worth more than US cents. They should be valued at 2 cents; this really is the biggest advantage of the CSP over almost any other card. So the output numbers are not quite right.

Re: Is the Chase Sapphire Preferred worth carrying permanently?

ryanbush wrote:

This, I just booked a plane ticket for my mom about an hour ago. the cheapest published rate online was right at 900$ it cost me 25k Membership Rewards points converted to Delta Skymiles (1:1 rate on transfer bonus right now) that made the effective cash back rate on AMEX at 3.5% on all purchases, quite a bit better than any other card out there for all purchases.

Nice! Skypesos are almost impossible to redeem at the lowest award tier - hence the name. Very, very rarely is anyone ever able to book a Delta roundtrip ticket with 25k miles.

Re: Is the Chase Sapphire Preferred worth carrying permanently?

Open123 wrote:

For higher spending, the fee travel cards are more compelling. Mainly, because when spending increases, the most important aspect isn't the bonus spending, but not have caps on said spending. All issuers have caps of some kind. 5% categories are capped at $1,500; Priceline bonuss capped at 2,500; etc...Amex and Chase are two of the only issuers who have 0 caps on regular spending.

Not sure what you mean here. Cap One 1.5% cards, for example, are uncapped, as is Fidelity Amex. Off hand, the 5% revolvers and the BCP/BCE grocery cap are the only capped ones that come to mind, although I am sure there are others.

But I generally agree with the analysis. Something recent on another forum stuck in my mind about relative value. The poster said that he spends about $40K a year, and if he used a 2% card that would generate $800, which he would hardly notice. Spent correctly on miles cards, it would transform a trans-ocean vacation flight from coach to business or first, a much more memorable experience.

Re: Is the Chase Sapphire Preferred worth carrying permanently?

bs6054 wrote:

Open123 wrote:

For higher spending, the fee travel cards are more compelling. Mainly, because when spending increases, the most important aspect isn't the bonus spending, but not have caps on said spending. All issuers have caps of some kind. 5% categories are capped at $1,500; Priceline bonuss capped at 2,500; etc...Amex and Chase are two of the only issuers who have 0 caps on regular spending.

Not sure what you mean here. Cap One 1.5% cards, for example, are uncapped, as is Fidelity Amex. Off hand, the 5% revolvers and the BCP/BCE grocery cap are the only capped ones that come to mind, although I am sure there are others.

But I generally agree with the analysis. Something recent on another forum stuck in my mind about relative value. The poster said that he spends about $40K a year, and if he used a 2% card that would generate $800, which he would hardly notice. Spent correctly on miles cards, it would transform a trans-ocean vacation flight from coach to business or first, a much more memorable experience.

Mainly, what I mean is that with higher spending, Amex and Chase will have rewards on all points earned for the year. For example, the new Bus Blue (after the 3rd year) will confer 30% bonus on all MR points earned.

So, let's say you spend $100,000 total, this will be a 30,000 MR point bonus. MR points redeemed for international business flights selectively can result in a return of 5%. The bonus MR, the promo transfer bonuses all add up. In this example, 2% of $100k is $2,000. Not bad!

But, 130,000 MR points can be redeemed for $10,000 in airfare, if done opportunistically.

PS - Also, the issue is that with business spending (paying venders) is so high that issuers other than Amex or Chase will not be able to accomodate as readily. For example, for a business Amex charge, revolving $50K per month for vendors is much easier to attain than a CL from other issuers.

Re: Is the Chase Sapphire Preferred worth carrying permanently?

HiLine wrote:

ryanbush wrote:

This, I just booked a plane ticket for my mom about an hour ago. the cheapest published rate online was right at 900$ it cost me 25k Membership Rewards points converted to Delta Skymiles (1:1 rate on transfer bonus right now) that made the effective cash back rate on AMEX at 3.5% on all purchases, quite a bit better than any other card out there for all purchases.

Nice! Skypesos are almost impossible to redeem at the lowest award tier - hence the name. Very, very rarely is anyone ever able to book a Delta roundtrip ticket with 25k miles.

Yeah I hear that quite often but I have never had an issue booking a lowest tier award Domestic, and last September I was actually able to find a low award for two people to Mexico if you will believe that.

I'm currently trying to find a low award for this June anywhere to Mexico or the Caribbean for my honeymoon and it doesn't seem like there is anything at all available

Re: Is the Chase Sapphire Preferred worth carrying permanently?

HiLine, no doubt Fidelity with 2% is better than BofA Travel Rewards with 1.5% (or even 1.65), but I was sure that Fidelity card is offered only to those who have certain relationship with Fidelity Investments, right? If so, that would probably not be a fair comparison as CSP and BofA Travel are offered to whoever wants them (condition he/she is creditworthy enough). Frankly saying, I used BofA Travel mostly because I have this card, I like it and this card is #1 benchmark for me comparing it to the other cards...

"Value" of points is also something one can argue for a long time about. Back to my life abroad, I've always been a huge fan of cards with pure air miles (usually, 1 or 2 miles per $). In this case the actual value when you redeem you bonus might well exceed any reasonable value you can get from cash-back. If you happen to book a ticket for Christmas time for 25000 miles paying only ~$100 in fuel charges/taxes, and this ticket costs $1000 or so in the market, then you have an increadibly good deal. If you happened to redeem 25000 miles + $100 in taxes for a ticket that costs $200 in the market, you've probably made not very wise decision.

If we are talking about #1, then I'am almost 100% sure we will quickly find a combination of 3...4 or more cards (even no-AF ones) that will economically be better than CSP alone. If we also take into account cards with rotating categories, CSP will lose this battle for sure.

Although I think that this comparison is not 100% fair. It is cherrypicking and I doubt an average consumer (one who doesn't spend all nights long on myFico :-) ) will be able to properly handle all those cards to maximize his gain. CSP is more positioned (at least in my view) as a kind of "everyday use card"...

The goal I had in mind when writing the first post was to compare the CSP with a benchmark no-annual fee card to show whether the CSP is worth keeping in the long run given the high annual fee.

Scenario 1: carry the CSP permanently for everyday spending

Scenario 2: carry a no-annual fee card for everyday spending

Which scenario results in higher measurable returns?

I am of course not comparing one single card to a portfolio of cards because

1, it would be like comparing apples to oranges

2, I personally find carrying multiple cards in my wallet an inconvenience. I'd rather drop $100 in cash back per year than carry 5 cards all the time. Remembering which card to use in each type of purchase, and making sure each card is paid on time, takes away my free will which I would rather use for any other purpose.

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IMPORTANT INFORMATION: All FICO® Score products made available on myFICO.com include a FICO® Score 8, along with additional FICO® Score versions. Your lender or insurer may use a different FICO® Score than the versions you receive from myFICO, or another type of credit score altogether. Learn more

FICO, myFICO, Score Watch, The score lenders use, and The Score That Matters are trademarks or registered trademarks of Fair Isaac Corporation. Equifax Credit Report is a trademark of Equifax, Inc. and its affiliated companies. Many factors affect your FICO Score and the interest rates you may receive. Fair Isaac is not a credit repair organization as defined under federal or state law, including the Credit Repair Organizations Act. Fair Isaac does not provide "credit repair" services or advice or assistance regarding "rebuilding" or "improving" your credit record, credit history or credit rating. FTC's website on credit.